Employees benefits pros and cons from a business perspective.

1. Employees benefits:
Pros & Cons
Christine Bills, Lindsey Janosko , Evelyne Ringia,
Suzanne Mell.

2. Employee Benefits
Compensation in forms other than cash
Types of employees benefits:
• Paid leave for vacations and holidays
• Life and medical insurance
• Retirement plans
• Flexible working hours
• Family friendly benefits

3. • Google: Free food, car wash and oil changes, massages,
yoga, playroom, back-up childcare assistance, and
$12000/year in tuition reimbursement
• Scripps Health: concierge, massage, tuition reimbursement,
and pet insurance
• Timberland: 40 hours paid to volunteer
• Ernst & Young: concierge, parental leave, and same
benefits to same-sex partners as for opposite-sex partners
Examples of Companies with
Various Benefits

4. • AOL: new parents get 8 weeks fully paid (adoptive parents
get 2 weeks) and on-site day care facility
• Deloitte: 3-6 months partially paid leave to volunteer or
enhance career
• Starbucks: health insurance for part-time employees
• Umpqua Bank: clothing advance of up to $1000
• Grasshopper Group: 4 weeks paid time off, every Friday
Memorial Day to Labor Day ends at 1pm,and $5 daily lunch
allowance
Examples of Companies with
Various Benefits

5. Why offer Employees
benefits?
• Compliance with the law
• Get financial savings
• Obtain a competitive edge in the market
• Recruit/Retain Top Performers

6. Benefits Required by Law
BENEFIT EMPLOYER REQUIREMENT
Social Security Flat payroll tax on employees and employers
Unemployment
insurance
Payroll tax on employers that depends on state
requirements and experience rating
Workers’ compensation
insurance
Provide coverage according to state
requirements. Premiums depend on experience
rating
Family and medical
leave
Up to 12 weeks of unpaid leave for childbirth,
adoption, or serious illness
Health care Provisions of 2010 law phased in through 2014

7. Benefits Required by Law
• The law does require employers to offer
employees benefits such as:
- Time off to vote
- Comply with all workers’ compensation
requirements
- Withhold social security from paychecks
- Contribute to short-term disability programs
- Employers pay federal & state unemployment
taxes to provide benefits for unemployed
workers
- Comply with Family Medical Leave Absence
(FMLA)

8. Benefits Required by Law
Health care benefit
Hawaii is the first state to require employers to provide health
insurance to employees. The law, the Prepaid Health Care Act,
was passed in 1974 and requires employers to provide health
insurance to all full-time employees, either through an indemnity
plan or an HMO
Avoid health care reform assessments. The Patient Protection
and Affordable Care Act and related legislation requires
employers with 50 or more full-time employees (or a combination
of full-time and part-time employees that is equivalent to 50 full-
time employees) to offer adequate health coverage or be subject
to assessment if their employees receive premium tax credits to
buy their own insurance. This mandate is in effect beginning in
2015

9. Financial Savings
You can offer employees something that increases their
compensation package and yet allows you an income tax
deduction for the contribution, so that your out-of-pocket
cost is less than the value of the benefit to the employee.
Self-employed individuals can deduct 100 percent of their
health insurance premium costs as a business expense.
You can always deduct 100 percent of premiums for your
employees. If the business is incorporated, all costs for
your own insurance as well as your employees' is
deductible.
Tax advantage

10. Financial Savings
•Take advantage of the small business health care
tax credit:
• Small businesses with fewer than 25 employees
may be eligible for a tax credit for purchasing
health insurance for their employees.
Tax advantage

11. Financial servings
Employees often will accept better
benefits in lieu of a higher salary,
which can be a savings to the
business.
Benefits in lieu of a higher salary

12. Financial servings
Another cost advantage of paying benefits is that
employers, especially large ones, often can get a better
deal on insurance or other programs than employees can
obtain on their own. (group purchasing power)
For instance, small businesses (generally, those with 50 or
fewer full-time employees) may purchase health care
coverage through a government-run insurance
marketplace established specifically for them—the Small
Business Health Options Program (SHOP)
Utilizing economies of scale

13. Increasing a Competitive Edge
• Attract and retain the most qualified
employees:
- Market Dependent, are your competitors
offering:
• Health, vision and dental insurance
• Tuition reimbursement
• Wellness programs
• Incentive/performance bonuses
• Professional development
Attract and retain quality employees.

14. Increasing a competitive edge
Offering health insurance has been shown
to decrease absenteeism and improve
employee health and morale.
Higher employee motivation

15. Increasing a competitive edge
Increase productivity
Insurance plans offer preventative care that can keep
employees healthy and working. If employees don't get
preventative care and yearly physicals (which they might not
do if they don't have insurance), you could end up having
more employees out for long periods of time with serious
illnesses.

16. • Too expensive.
• Too much paperwork
• Not required by law
• Not the company’s
responsibility
• Little value to this kind of company
Cons of Offering Health
Insurance as a Benefit:

17. Cons of Offering Health Insurance as
a Benefit:
• High employee turnover
• Policy offerings are too complicated
• Not familiar enough with options
• Most employees are not interested in
coverage
• Most employees are covered elsewhere
• Most employees would not be eligible

18. Major Drawback of Providing
Benefits: Cost
$- $20,000 $40,000 $60,000 $80,000$100,000
Employee 1
Employee 2
Employee 3
Base Salary
Benefits & Taxes
$50,000
$30,000
$70,000
$14,000
$16,000
$18,000

19. Source: Bureau of Labor Statistics (2013)
Relative importance of employer costs for employee compensation, December 2013
Compensation component Civilian workers % Private industry % State and local government %
Wages and salaries
69 70.1 64.5
Benefits
31 29.9 35.5
Paid leave
7 6.9 7.3
Supplemental pay
2.4 2.9 0.8
Insurance
9 8.3 12
Health benefits
8.5 7.8 11.6
Retirement and savings
4.8 3.7 9.4
Defined benefit
3 1.6 8.6
Defined contribution
1.9 2.1 0.8
Legally required
7.8 8.2 6

20. The Cons of Providing
Benefits:
• Benefits costs more for small employers than
for large ones due to:
- Higher prices because of lesser buying power
- Higher costs of administration
• Administrative costs of designing a retirement
plan
• Increased benefits = Increased administrative
overhead

21. The Cons of Providing
Benefits:
• The cost of health insurance has steadily risen,
making it:
- Less affordable to employers, and employees
- Difficult to plan financially from year to year
• Offering benefits creates legal compliance
concerns:
- Companies incur legal fees
- Mistakes made in benefit plans can lead to lawsuits or
regulatory fines

22. Value Proposition
• A Value Proposition is the overall perceived value of
the organization
• Developing a value proposition is based on a review
and analysis of the benefits, costs and value that an
organization can deliver to its employees
• A strong value proposition differentiates great
companies from the mediocre ones

23. A Value Proposition Includes:
• Corporate Culture and Values: what makes your
company unique?
• Corporate Citizenship: company’s contribution to the
community
• Rewards and Retention: A-players wants
rewards based on their performances and
contributions
• Growth and Career Runway: opportunities
for growth , both vertically and horizontally?

24. Employee Benefits
• The law does not require employers to provide
the following benefits to their employees:
- Retirement Plans
- Vision, Dental Plans
- Life insurance plans
- Paid sick time, vacation days & holidays

25. Affordable Care Act
• Affordable Care Act: Law that requires
companies to offer health insurance if company
has more than 50 full-time FTE’s:
• Full-time FTES defined as >30 hours/week or 130
hours/month
• Pay a fine if they do not cover their employees &
their families starting in 2014:
• 2,000 Per full time employee

26. Impact to Major Stakeholders:
Business
• Small businesses:
- Potential for Small Business Health Care Tax Credit
• Increasing from 35% to 50% in 2014
• Businesses with more than 50 full time employees:
- If the employer does not offer affordable health insurance
options they will be subject to a penalty:
• $2000 per FT employees (excluding the first 30 employees)
- If the employer offers insurance but it doesn’t meet minimum
requirements:
• $3000 per FT employee who qualifies for marketplace premium
savings

27. Cost Disadvantages
• Health Insurance Costs are 17.9% of the GDP
( Gross Domestic Product) in the U.S.
• Much Cheaper to pay fine than pay for health
insurance Benefits
Health Care Cost Statistics Single Coverage Family Coverage
Average cost of Healthcare in the U.S. $5,615 $15,745
Average cost to employee with a company plan $1,225 $4,316
Company Contribution to Insurance Costs $ 4390 $ 11,429
Company Fines For Not Supplying Health
Insurance ( >50 FTE’s)
$2,000 $ 2,000

28. Cost Disadvantages
• According to the Bureau of Labor Statistics:
- Private companies pay out $9.21 an hour per
employees with benefits
• 30% of the cost of employee compensation
- Local & state government agencies pay out
$14.19 per hour per each employee with
benefits
• 34.8% of the cost of employee
compensation

29. Cost Disadvantages
• Employees may take advantage of employment
benefits & the company may pay unnecessary costs:
- Ex) RAME a small roofing company with 70 FTE- would put
5% of every hour worked by employee into their retirement
plan (401K)
- Employees would quit just to take their retirement out,
willingly taking the penalty of 50% since they did not put any
of the money in the retirement fund themselves.

30. Disadvantages
• The population is aging and health insurance is
becoming more expensive
- Costs companies more money offer health insurance plans to
employees
Ex) Company wellness & prevention programs
• Requires employees to share health information in order to
receive lower monthly premiums & financial incentives
• Can be seen as coercive, threatening & intimidating by
employees- can actually backfire on employers

31. Disadvantages
• Employee benefits are confusing
• Many employees do not understand
what is being offered to them or do not
take advantage of packages offered to
them
• Small companies do not have human
resource support
- Disempower employees

32. Conclusion. . .
Employees benefits have both advantages
and disadvantages to the employer so
employers have to do a cost benefits
assessment in designing the benefits so that
they can make business sense as well as
being compliant with the law

33. SHRM Executive
Summary
• Create a Strategy to Comply with Patient
Protection and Affordable Care Act
• Promote Workplace Flexibility Initiatives
• Improve Employee Benefits Communication
• Obtain Feedback

34. Questions? Comments?

35. References
Brox, Denene “14 Companies with Incredible Employee Perks” http://www.salary.com/14-companies-
with-incredible-employee-perks/
Kaiser Family Foundation. (2013, December 19). Health insurance cost statistics. Retrieved from
http://www.statisticbrain.com/health-insurance-cost-statistics/
IRS. (2014, February 27). Questions and answers on employer shared responsibility provisions under the
affordable care act. Retrieved from http://www.irs.gov/uac/Newsroom/Questions-and-
Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act
(March 12, 2014) Economic news release. Bureau of labor statistics. Retrieved March 17,
2014. from http://www.bls.gov/news.release/ecec.nr0.htm
(January 14,2014) Should you offer health care benefits?. Business Owners Toolkit. Retrieved on
March 15, 2014 from http://www.bizfilings.com/toolkit/sbg/office-hr/managing-the-
workplace/offering-health-care-benefits.aspx
Pro and Cons: Offering Employee Benefits . Findlaw.com. Retrieved March 15,2014 from
http://smallbusiness.findlaw.com/employment-law-and-human-resources/pro-and-
cons-offering-employee-benefits.html#sthash.UptznLZk.dpuf